Buying a home is easier with a college degree, except in these places

JillianBerman

Reporter

Is college a good investment? The answer is still unequivocally yes. But if your ultimate goal is to save for a home as quickly as possible, a college degree could hold you back depending on where you want to live, a new study suggests.

Americans whose ultimate dream is to own a home and who are willing to live in 30 relatively inexpensive housing markets across the country may have an easier time saving for a down payment if they didn’t go to college, according to an analysis published by real estate site Trulia this week. In four metro areas -- Columbia, S.C., El Paso, Texas, Daytona Beach, Fla. and Las Vegas, — people without a college degree can save for a 20% down payment more than a year faster than those with a degree, Trulia found.

“Having a college degree is not always the fastest route to owning your first home,” said Ralph McLaughlin, a housing economist at Trulia who authored the study.

You might be wondering how that’s possible, given that people with college degrees are more likely to be employed and typically make more money than their counterparts who only finished high school. Trulia finds that in these metro areas, the wage premium for a college degree isn’t that high, when you compare the median income for those with and without a bachelor’s degree.

The researchers also make a big assumption -- that every college graduate has student loans and is forking over an average monthly payment of $280, so any extra income a college graduate could put toward saving for a home is canceled out by their loan payments.

While the findings certainly make good fodder for Internet chatter (see here and here), they belie the reality that even with debt, college is a good investment for those who finish, particularly if the ultimate goal is to land a decent paying job, own a home in most places and build wealth.

“If you want to earn enough money to be able to qualify for a mortgage in most cases you need a college degree,” said Mark Kantrowitz, the publisher of Edvisors.com, a financial aid information website. College graduates own homes at a much higher rate than their counterparts who only finished high school, according to the Bureau of Labor Statistics.

While there’s some research out there that indicates student debt is weighing on young Americans’ ability to buy homes, there’s also evidence to suggest that the recent decline in homeownership among young adults has less to do with big student loan bills and more to do with stricter lending standards in the wake of the recession, which have made it tougher for 20-somethings to qualify for a mortgage.

And for those who are interested in building wealth over a lifetime, getting a bachelor’s degree is probably a safer bet than skipping school and saving money toward a house in one of the 30 metro areas Trulia identified. College graduates make $1 million more over the course of their lives on average than Americans who only finished high school, according to a recent report from Georgetown University’s Center on Education and the Workforce.

And while 70% of bachelor’s degree recipients graduate college with debt https://www.whitehouse.gov/the-press-office/2015/03/10/fact-sheet-student-aid-bill-rights-taking-action-ensure-strong-consumer-, the boost in earnings means that the majority of those people are managing their payments successfully, according to a survey from the Federal Reserve Board of Governors published earlier this year.

In many of the most expensive markets in the country, those without a college degree will spend nearly double the time saving for a home than those with at least a bachelor’s, according to Trulia. In the cheaper markets, those with a college degree will ultimately be better off, too; while it may take them longer to save for their first home because of their student loan payments, as their wealth builds they’ll ultimately be able to afford a more expensive house.

“In the long run, going to school pays off even if you have debt,” McLaughlin said. College graduates are “more likely to be able to save for the home of their dreams.”

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